Barra Cleans House at GM, Vows to “Do the Right Thing” Following Recall Report

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In what could amount to one of history’s biggest episodes of bloodletting by a major corporation, General Motors CEO Mary Barra dismissed 15 employees—including at least eight senior executives—in the ignition switch recall debacle.

And no doubt hoping as much as dictating, Barra pronounced an end to “the personnel issues in this matter” as she addressed GM employees today in a global town hall about her actions. The move comes after Barra received the final report from the investigation she commissioned by former federal prosecutor Anton Valukas.

After combing through 41 million documents, he found what Barra called “a pattern of incompetence and neglect” that led to 11 years of delays in recalling millions of cars for the ignition switch defect that killed at least 13 motorists—and has swallowed up Barra’s new tenure since early this year.[more]

The town hall and following press conference, which were broadcast live online, attempted to put a period on the recall disaster by cleaning house, announcing a compensation program for victims of related car crashes and encouraging employees to be more vocal and rigorous in their reporting of safety issues. Barra spoke extensively to the changes in corporate culture she is implementing in order to create a departure from the leadership and work styles that harbored the recall problem.

“As I lead GM through this crisis, I want everyone to know that I am guided by two clear principles: First, that we do the right thing for those who were harmed; and, second, that we accept responsibility for our mistakes and commit to doing everything within our power to prevent this problem from ever happening again,” she told employees.

But doing the right thing right now may not be enough for lawmakers and advocates. “This report reveals GM recognizes it must take the difficult but important initial steps to clean up a culture of ineptitude,” Massachusetts Senator Ed Markey said in a statement, according to USA Today. “But we need more than an accounting of past mistakes; we need to ensure accountability and that permanent measures are put in place to prevent future deaths.”

Describing the actions as a “tragic set of events of serious mistakes made over a long period of time,” Barra told reporters that there have been “far-reaching” changes made within departments across the company, though neglected to name any of the 15 people that were let go or five that were disciplined. For example, she said, GM, whose stocks dropped following the release of the report, is now using data analytics to detect and track all recall reports from both internal and external sources.

Barra vowed that there has been a dramatic change in GM with a “commitment to a high-safety, high-quality culture” of “award-winning cars, trucks and crossovers” with the “customer in the center.” She said that GM employees are “internalizing” these problems and “want to build great cars” and “do the right thing for customers.” In turn, management wants to “empower employees who raise safety issues,” Barra concluded, promising that there would be “transparency across senior leadership.”

Valukas’s report found no evidence of a proactive cover-up or, notably, that either Barra or predecessor Dan Akerson knew about the festering recall problems until after he handed off the CEO baton to her in December. There was “no conspiracy,” Barra said, nor any “trade-off between fixes and costs”; rather, a string of “mistakes” and oversights led to the safety weaknesses. 

But for some, like Attorney Jere Beasley, who is filing cases on behalf of victims, the “I didn’t know” excuse seems unlikely. “I have great, great difficulty believing the top people at GM, over 11 years, did not know about this defect and participate in a cover-up on this defect,” he told the newspaper

Barra also announced the creation of a compensation program for victims and their families which will be designed and run by Kenneth Feinberg, who designed the 9/11 victim compensation program. The voluntary program, which is still in development, will aim to locate and compensate anyone that lost a loved one or sustained serious injury from a crash tied to the ignition switch failure. 

She stressed that GM wouldn’t lean on its bankruptcy protection, provided as part of the US government bailout in 2009, to avoid court proceedings with victims who choose to opt out of GM’s compensation program and go to court instead. The program will compensate based on death or injury, not lost car value, and GM will start accepting claims August 1. 

The CEO also said that GM is still determining whether the number of official deaths related to the ignition switch recall in old Chevy Cobalts and other cars would increase from its current number, 13, and that Feinberg would be the one to make such determinations based on his review of the claims. 

None of this means Barra or GM are out of the woods on this issue. After all, Congress is still conducting its own investigation after GM accepted a record $35 million fine for delaying its report of recalls. But it’s possible now that both the company and its instantly battle-tested new chief are over the hump. So far, sales of Chevrolet, Buick, Cadillac and GMC brands have held up very well during this period of intensive media and regulatory scrutiny of GM’s safety practices. With today’s actions, Barra may have created an increment of goodwill that could help keep the momentum going.

• Connect with Dale on Twitter: @daledbuss

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